The Day Zuckerberg Freaked Out the Treasury Secretary
Hanging cockeyed off a ladder with an impact driver in one hand and a socket wrench in the other, sweat dripping in my eyes and the dogs running off with my instructions, I wondered, not for the last time, what I was doing...
My beautiful wife has recently discovered the bargains available on Facebook (NASDAQ: FB) marketplace. If you don’t know, Facebook has usurped the Craigslist space for classified ads, which was why I was building a gazebo on a hot July afternoon.
This is part of the reason I recommended FB in my last issue of Christian DeHaemer’s Bull and Bust Report.
The main reason, however, was due to the incredible, world-shaking ambition of its new cryptocurrency: the Libra.
Imagine if a billion people from all over the world ditched the dollar, the euro, and the yen and used a Facebook currency instead.
This idea so scared the U.S. government that Secretary Mnuchin called a press conference. He said the U.S. has very serious concerns that Facebook’s Libra could be misused by terrorists, money launderers, and drug dealers and that it was a national security issue.
Of course, any time the government runs into competition, it drops the terrorism card. But it is telling how much the Libra has scared the powers that be.
According to CNBC:
In a press conference Monday, Mnuchin said Facebook’s planned digital currency “could be misused by money launderers and terrorist financiers” and that it was a “national security issue.”
“Cryptocurrencies such as bitcoin have been exploited to support billions of dollars of illicit activity like cyber crime, tax evasion, extortion, ransomware, illicit drugs and human trafficking,” Mnuchin said, adding that he is “not comfortable today” with Facebook’s launch.
“They have a lot of work to do.”
The Trumpster Is Not a Fan
Last week, Donald Trump tweeted that he was not a fan of cryptocurrencies like Bitcoin and that Facebook would need a bank charter before launching its currency.
Bitcoin fell 10% after the tweet but climbed back to 10,850 after the Treasury press conference — though it is trending down again as I write this.
As I screwed in metal tube U3 to bracket F4, I contemplated the real reason the highest levels of the U.S. government are going after crypto... why now?
The answer is because what Facebook is proposing will not only be incredibly profitable but will also infringe directly on the U.S. Treasury.
Facebook would become a supranational U.S. Treasury and Federal Reserve combined.
You see, Facebook is really launching two currencies. One is the Libra. You buy $100, you get $100.
The other, for insiders, is a Libra Investment Token. This costs $10 million and is only available to select people or groups. This is where the big bucks will be made.
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Kirk Phillips at CoinDesk put it best when he described the huge possible scale of Libra. He writes:
To size up Libra’s potential market, let’s look at the U.S. money supply as tracked by the Federal Reserve.
In January 2019, M1 (which includes cash, coins, and money in checking accounts) stood at $3.7 trillion, in a country of about 329 million people. This compares against M2 at more than $14 trillion, which is everything in M1 plus savings accounts, money market funds, certificates of deposit and other bank deposits.
Assume that after a couple of years Libra has achieved adoption equal to 10 percent of M1. We’ll also assume that by this time Libra has sold $1 billion worth of the investment token and that it costs $1 billion a year to run the network and manage the fund’s investments. And we’ll assume T-bill rates hold constant.
After those expenses, Libra would be generating almost $7 billion of interest per year, with a yearly return on investment (ROI) of 688.51 percent.
That’s incredible, but it gets better.
In a recent podcast, Andreas M. Antonopoulos, an early Bitcoin advocate, said:
This makes [Libra] look like a kind of Neo-IMF [International Monetary Fund]. A new model for an IMF that is based on consumer or retail banking, with reserves built up by consumers but which will give them the ability to do things very similar to what the IMF does.
If I’m a central banker, or if I’m a government politician or someone who works in the finance ministry of say, France or India, I would look at this and say “Dear God; at some point [Libra] will be able to come in, not only buy up our bonds, but then hold us over a barrel” and dictate to small countries, until eventually it can dictate to medium countries, then large countries...
A Third of the Global Population
In the first quarter of 2019, Facebook had a membership list of 2.38 billion active members. It is by far the largest “nation” on Earth. If only a small portion of this list uses Libra, Facebook will become the most powerful financial institution in the history of the world.
And Zuckerberg would be god.
The market has yet to grasp the enormity of this idea. But right now I’m putting together a list of stocks that will benefit from the Libra rollout. The profit potential is exceptional, and I’m saying this as someone who recommended Bitcoin early and provided readers with 2,528% returns...
Since 1995, Christian DeHaemer has specialized in frontier market opportunities. He has traveled extensively and invested in places as varied as Cuba, Mongolia, and Kenya. Chris believes the best way to make money is to get there first with the most. Christian is the founder of Bull and Bust Report and an editor at Energy and Capital. For more on Christian, see his editor's page.
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